Correlation Between Gran Tierra and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Gran Tierra and Dow Jones at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Gran Tierra and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gran Tierra Energy and Dow Jones Industrial, you can compare the effects of market volatilities on Gran Tierra and Dow Jones and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Gran Tierra with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gran Tierra and Dow Jones.
Diversification Opportunities for Gran Tierra and Dow Jones
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gran and Dow is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Gran Tierra is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Gran Tierra Energy are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Gran Tierra i.e., Gran Tierra and Dow Jones go up and down completely randomly.
Pair Corralation between Gran Tierra and Dow Jones
Assuming the 90 days trading horizon Gran Tierra Energy is expected to generate 3.15 times more return on investment than Dow Jones. However, Gran Tierra is 3.15 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 824.00 in Gran Tierra Energy on August 26, 2024 and sell it today you would earn a total of 69.00 from holding Gran Tierra Energy or generate 8.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Gran Tierra Energy vs. Dow Jones Industrial
Performance |
| Timeline |
Gran Tierra and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Gran Tierra Energy
Pair trading matchups for Gran Tierra
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Gran Tierra and Dow Jones
The main advantage of trading using opposite Gran Tierra and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gran Tierra position performs unexpectedly, Dow Jones can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dow Jones will offset losses from the drop in Dow Jones' long position.| Gran Tierra vs. InPlay Oil Corp | Gran Tierra vs. Yangarra Resources | Gran Tierra vs. iShares Canadian HYBrid | Gran Tierra vs. Altagas Cum Red |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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